Capital Markets: Observations & Insights

Recipe for an Increase in Business Spending ​ Productivity Pick-Up

• Profit growth

• Tax reform—lower statutory rates, foreign profit repatriation, accelerated depreciation

• Higher business confidence—driven in part by lower regulation and certainty on taxes

• Banks’ increased willingness to make commercial loans

• Accommodative financial conditions—interest rates and spreads

S&P 500 EPS

Business Spending

20%

15%

An acceleration in earnings growth should help drive a double-digit increase in business spending

Forecasted

10%

5%

0%

Year-Over-Year Change

-5%

2011

2012

2013

2014

2015

2016

2017E

2018E

Source: FactSet. Business spending is U.S. private fixed nonresidential investment with an estimate for 4Q17 as well as 2018, the latter based on a regression with S&P 500 EPS. S&P 500 EPS 2017 estimate based on consensus and 2018 is Alger estimate.

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